Retail investors, consumers want ethics over returns

TGL News

The majority of Australian retail investors would be willing to see lower returns if the companies they invested in always behaved ethically, a recent report has found.

The report, conducted by KPMG, surveyed 1510 Australian retail shareholders and found transparency and honesty to be one of the most sought after factors when considering which companies to invest in, second only to returns.

The survey also found 57 per cent of shareholders would be willing to accept lower financial returns if a company “always acted ethically towards customers, employees and the community”, and 72 per cent valued “reputation” ahead of “recent dividends” (69 per cent).

These findings speak to the value modern investors place on trustworthy and ethical behaviour, KPMG’s head of customer, branding and marketing, Amanda Hicks said.

“What this new research makes clear for the first time is Australian retail investors are now keenly aware of the importance of reputation, transparency, ethical behaviour, values alignment, and social responsibility.”

40 per cent of consumers have stopped doing business with a company because of its words or actions about a social issue.

The report also found untrustworthy leadership practices such as excessive pay for management to be a point of repulsion for stakeholders. While only 10 per cent of investors surveyed said paying leadership and executives fairly would motivate them to purchase shares, 38 per cent said they would be compelled to sell shares if the company’s leadership was paid lavishly.

“This is a hugely significant finding,” Hicks said, “because it reinforces just how complex the idea of ‘shareholder value’ is in the modern era.

“Australian investors are not looking for directors and management with a laser focus on short-term returns. They expect more of corporate leadership and will shift their investment elsewhere if they don’t get it.”

This pattern of shareholders placing increased value on ethical behaviour has also been reflected among consumers, with another one report finding 61 per cent of Australians surveyed would consider a company’s ethical values and authenticity when making purchases.

The same report, conducted by Accenture, found 40 per cent of consumers have stopped doing business with a company because of its words or actions about a social issue.

“Consumers are no longer making decisions based solely on product selection or price,” Accentuate’s report concluded, “they’re assessing what a brand says, what it does and what it stands for. They support companies whose brand purpose aligns with their beliefs. And they reject those that don’t.”

These trends point to a shift in expectations when it comes to “delivering value for shareholders”, KPMG’s Australia chairman, Alison Kitchen concluded.

“Our research indicates that boards and management have a green light from shareholders to pursue genuine efforts to become more transparent, more honest, more ethical, and more values-driven,” she said.